Such formal appeals are known as tax certiorari, or tax certs. Every year in New York, municipalities and school districts hand back hundreds of thousands or even millions of dollars in property tax refunds.
Property owners say the refunds are a just reward for assessments that can be inaccurate ? years and sometimes decades out of date. But some agencies, already struggling with tight budgets, are taking on debt to make the payments.
Filing an annual tax cert appeal is routine for big companies, which typically own large and expensive parcels of land, experts say. Among the corporations that have filed for refunds in New York recently are I.B.M., Verizon and 7-Eleven.
Negotiated remedies can be a lump sum repayment, but companies also can agree to receive no repayment. In these cases, owners might simply agree to a new assessment they believe is fairer. Sometimes governments agree to spread the settlement amount over several years, in which case a business pays no property taxes until the repayment is complete.
In a case in Poughkeepsie, I.B.M. protested the 2008 and 2009 annual assessments of its 3.8 million-square-foot plant along South Road. The property had been valued at $160 million in those years, said David D. Hagstrom, who acted as special counsel for the Town of Poughkeepsie.
The resulting negotiated deal kept the $160 million assessments in 2008 and 2009, but the property?s value was reduced to $110 million and frozen there for 15 years. Local governments are satisfied because they did not have to hand back any money.
And not only does I.B.M. get a predictable and lower tax bill for many years, it is also immune from any tax increases approved by the town and schools over that period. There are exceptions for major development at the plant and another major downturn of local property values.
?Tax certs certainly have had more impact on local governments through the downturn, particularly commercial, industrial and retail? claims, said Karla M. Corpus, a real estate tax expert and a partner in the Syracuse office of the law firm Hiscock Barclay.
While towns and counties feel the pain of refunds, said Ralph Napolitano, the superintendent of Yorktown Central School District in Westchester County, schools are hardest hit because the largest share of most tax bills is earmarked to finance them. As a result, up to 60 percent of a refund can come from schools.
Mr. Napolitano said Yorktown schools refunded $45,000 in the 2008-9 school year, $52,000 in 2009-10 and $934,000 in 2010-11. Already this year, the district has committed to $877,000 in refunds, he said.
Daniel McCann, the superintendent of the nearby Hendrick Hudson School District, in Montrose, said: ?We had $300,000 in tax certs last year, and this year, we?ll have $400,000. We don?t have a reserve for it anymore. We have to borrow.?
Successful tax cert appeals often set a new valuation that stands until the parcel is reassessed. In other words, it is likely that the property owner today will pay the lower taxes well into the future, hobbling districts when the economy rebounds.
It is not uncommon to find properties around the state that have not been revalued since the 1950s or even earlier. Of the 983 taxing authorities in the state, only 468 hold periodic reassessments, according to the state?s taxation and finance department. That is in no small part because potential voters assume wrongly that revaluations always raise their tax bills, said Matthew P. Metz, a real estate lawyer and former member of the town board in Yorktown.
By comparison, the Commonwealth of Massachusetts mandates statewide reassessments every three years, and Connecticut requires them every five years. Calls for an assessment mandate are increasing in Pennsylvania, which, like New York, leaves the process to municipalities.
New York City is among those municipalities that perform regular revaluations, reassessing its one million parcels every year.
In the city, the major complaint among commercial property owners is not that assessments are necessarily outdated, said Peter E. Blond, a partner at the law firm Brandt, Steinberg Lewis, which has represented businesses in tax-appeal cases since 1932.
Instead, Mr. Blond said, city assessors are overstretched and lack critical industry tools for making accurate assessments.
In response, Glenn Newman, the president of the New York City Tax Commission, said suggestions of insufficient training were ?questionable.? Finance Department and Tax Commission assessors are required to obtain certification from the State Board of Real Property Tax Services, Mr. Newman said. And, beginning with the 2011-12 tax year, the commission is imposing a fee on higher-value property to restore some positions cut in previous years and to move some commission functions online for easier access.
The fee, $175, is applied to property with an actual assessed value of at least $2 million.
For the foreseeable future, however, few expect any changes in how properties in the state are assessed. A bill, A9038-2011, has been introduced by Sandy Galef, assemblywoman of District 90, that would require all taxing authorities to reassess all their properties every four years. The legislation has been sent to the ways and means committee, but Ms. Galef concedes it will be ?really tough? to get it passed.
In New Rochelle, the finance commissioner, Howard Rattner, said he recently presented the City Council with a plan for regular revaluations, the first since the 1950s.
?The council told me, ?Sit on that one for a while,??? he said. This despite the city having had to negotiate $33 million in refunds for itself, local schools and Westchester County from 2002 to 2010. He expects to have processed an additional $8.5 million in 2011.
The combination of political unpopularity and cost might doom any effort to revamp the system. Several officials around the state say it is less expensive to pay tax cert refunds than to enact regular reassessments.
Ms. Corpus, of Hiscock Barclay, said ?a big chunk of the problem? with tax certs would be solved if Albany forced periodic reassessments. ?But the state would have to pay for it,? she said, ?and local governments would need to control the process, or it wouldn?t stand a chance.?
Article source: http://www.nytimes.com/2012/04/04/realestate/commercial/commercial-owners-gain-in-property-tax-appeals.html